Clearance Rates Up, But Outlook Stagnant
Results for week ending May22
The preliminary results show the combined capital city clearance rate hit 70 percent this week, up slightly from last week’s final reading of 69.5 percent. Auction volume was on par with last week, as 1,863 homes were brought to auction across the country.
The Stats
Sydney led the way for a third week in a row. The preliminary clearance rate was 74.2 percent, down from 76.2 percent the previous week. That makes five straight weeks at or above the 70 percent mark. Supply was up slightly from 647 last week to 700 this week.
Melbourne appears to have posted a sixth straight week in the 70’s, with a preliminary clearance rate of 70.7 percent. A total of 825 auctions were held this week, down from 871 last week, when the clearance rate was 71.3 percent.
The Graph
The Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 74.2% | 70.7% | 55.3% | 70.1% | 54.5% | 20.0% | 61.4% |
Auctions | 700 | 825 | 128 | 92 | 42 | 5 | 67 |
The Analysis
Buying activity remains strong on the back of a low interest rate outlook. In light of Glenn Stevens’ recommitment this week to an inflation band of 2 to 3 percent, more rate cuts are almost sure to come.
As auction volume diminishes coming into the winter months, more buyers may be competing for fewer available properties. We may therefore continue to see moderate increases in home prices, with Perth being the exception.
What It Means For Investors
Interest rates can’t stay low forever. A recent paper published by Capital Economics this week suggests interest rates will begin to rise again in 2019. They predict home prices to subsequently fall 3 percent that same year, and another 5 percent in 2020.
But the news isn’t all bearish. In the lead up, the same economists forecast prices to rise 4.5 percent this year, and then 2.5 percent in 2017, followed by a flat market in 2018.
Do the maths, and the next four years is shaping up to look pretty stagnant. If you’re a growth investor, don’t expect the market to provide much help toward your goal.
For the historical data of weekly auction clearance rates, click here.
Comments
Got something to say? Post a comment...
You must be logged in to post a comment.
If what you say is true then does it mean we stay out of the market?
No. It means that making money over the next five years will require a higher level of sophistication than the previous five years.
“will require a higher level of sophistication than the previous five years”
Great advice !!
Find market inefficiencies and problems, provide solutions. Same ol’ boring message Steve has been teaching for years.
I think before we reach a conclusion that a crash is eminent we must examine both side of the argument. Here are 2 article I found online which argue against a major crash:
http://www.businessinsider.com.au/why-its-good-news-that-50-of-australias-home-loan-borrowers-dont-have-to-make-a-repayment-for-a-year-2015-12
http://www.smh.com.au/business/big-short-on-aussie-banks-will-take-years-if-true-jpmorgan-says-20160303-gn9zpu.html
I have found that some investor have been shorting the Australian property market back in 2011 and have not done so well.